Recent remarks by the General Manager of the Confederation of Construction Specialists, Gerald Kelly, suggest sizeable hikes in Professional Indemnity (PI) insurance premiums, coupled with the level of policy excess the insured is required to pay, are now pummelling the UK construction sector.
According to the Confederation, the cost of insurance is creating a situation in which some sub-contractors are having to turn down work, whilst others are no longer able to trade. At the same time, there are new exclusions and demanding conditions being built into policies, which are often proving headaches for contractors.
Industry output is at a decade low – with new work at a volume last experienced in March 2009. Yet, despite low volumes, a skills shortage still remains and this is creating a construction sector ‘gig economy’, founded on ‘freelance’ sub-contractors. Labour Only Sub Contractor (LOSC) and Bona Fide Sub Contractors (BFSC) workers are now a main source of support for many projects and, worryingly, not always seen as falling within a construction company’s duty of care.
Public liability insurance should be held by any BFSC worker and it is a requirement of most insurers that the main contractor asks to see and check the insurance documentation prior to taking a BFSC worker on. When it comes to the headcount for Employers Liability (EL) Insurance protection, however, BFSC workers do not count.
Conversely, LOSC workers have to be protected by EL insurance, as do any students, volunteers, work-placement trainees and other workers not categorised as ‘employees’.
Insurance provision within the construction industry is becoming more restricted by the day, as some insurers withdraw from the sector, as Brexit uncertainty lingers and as insurers lick their wounds when it comes to sizeable global losses on Professional Indemnity risks. This confused picture, and the industry and insurance responses to the Grenfell Tower tragedy that are being experienced, are making it difficult for some contractors to understand their legal responsibilities. Whilst working out what insurance cover is required is one issue, another relates to what duty of care now looks like in construction.
A commercial insurance broker who understands the risks within construction and advise you of your legal obligations and duty of care, can bring the clarity you seek. Risk management is the bedrock of insurance, so a broker can not only provide you with good risk containment advice, but also work towards reducing your insurance premiums in the long term.
If you need specialist insurance advice, affordable insurance protection, or both, you should look for a knowledgeable broker who can access a range of insurer schemes and policies. To do this, please get in touch.